Order No. 2003-A-496

September 22, 2003

File No. M4210/A74-2

By Decision No. LET-A-409-2001 dated September 28, 2001, the Canadian Transportation Agency (hereinafter the Agency) granted, conditionally, an application filed by Air Canada, requesting to implement, on less than statutory notice, an insurance surcharge of 3 Canadian dollars/2 U.S. dollars applicable to transportation between Canada and points throughout the world. The Agency granted the application subject to the surcharge bearing an expiry date no later than 6 months following the effective date of the surcharge. By Decision No. LET-A-94-2002 dated March 28, 2002, the Agency granted Air Canada's application to extend this expiry date until October 31, 2002. By Order No. 2002-A-442 dated October 31, 2002, the Agency, in response to an application, permitted Air Canada to further extend the expiry date until March 31, 2003.

By Order No. 2003-A-169 dated March 12, 2003, Air Canada was permitted to extend its international insurance surcharge until July 31, 2003. The Agency, however, also directed Air Canada to provide, within 10 days of the date of the Order, a detailed explanation of the measures Air Canada plans to take to incorporate the insurance surcharge into the carrier's base fares. In Decision No. LET-A-147-2003 dated July 4, 2003, the Agency advised Air Canada that, given that it is currently under the protection of the Companies' Creditors Arrangement Act, the matter of incorporating the surcharge into the base fare is held in abeyance.

On June 17, 2003, the Airline Tariff Publishing Company, Agent on behalf of Air Canada, filed a tariff revision with the Agency, on statutory notice for an effective date of August 1, 2003, to extend the expiry date of the current insurance surcharge until December 31, 2003.

The Agency has carefully reviewed and considered Air Canada's tariff filing. As the Agency has noted previously, there has been a proliferation of surcharges in the aviation industry. In Decision No. 242-A-2001 dated May 14, 2001, Order No. 2002-A-216 dated June 7, 2002 and Order No. 2002-A-442 dated October 31, 2002, the Agency indicated to Air Canada that it is concerned that the ever-increasing use of surcharges limits consumers' ability to compare airfares, as the advertised price does not usually disclose the true price that the consumer will have to pay at the time of purchase. Accordingly, the Agency is of the opinion that air carriers should make every effort to incorporate surcharges into air fares and avoid such surcharges. If surcharges are used, however, they should be a temporary measure only, in response to identifiable and unforeseen events leading to increased carrier costs.

The continuation of the insurance surcharge runs contrary to the stated opinion of the Agency. However, given Air Canada's current situation, the Agency is prepared to allow Air Canada further time to adjust, and accepts this filing on statutory notice with an effective date of August 1, 2003 to extend the expiry date of the insurance surcharge until December 31, 2003. The Agency may review this matter sooner than the expiry date, upon complaint, or if there is a significant change in the circumstances which prompted the surcharge.